Pendragon in £75m fundraising call to help tackle its debt

Nottingham-based Pendragon, which sells marques including Ford, Fiat and Vauxhall from more than 300 sites, will raise the funds through the issue of new shares.

Pendragon must secure the multi-million pound fundraising as a condition of its banks agreeing to a new three-year financing deal.

The announcement came as Pendragon reported underlying pre-tax profits for the five months to May 31 of £9m, £1.1m higher than the previous year.

Pendragon said the fundraising will help the company reduce its debt to around £360m as well as allow it to proceed with a plan to eliminate its £40m pension deficit.

The group’s borrowing facilities will be extended to June 2014 if the rights issue goes ahead.

The company, which earlier this year withheld its full-year dividend to reduce debt, now plans to resume dividends from its financial year 2012.

Pendragon chairman Mike Davies said the announcement marked “an important step in the evolution of Pendragon”. Pendragon warned that the performance at its premium car division Stratstone – which sells Mercedes Benz and Maserati – had been held back by timing issues related to its autumn new model launches.

The business in California is trading well, Pendragon said, with sales up 9 per cent in the first five months.

Its volume car division Evans Halshaw reported a strong performance from its used car sales, the company added.

Mike Allen, an analyst at Numis, said: “We believe the rights issue is good news in the longer term, which should allow the company to run the business on reduced leverage, allow a dividend to be paid in 2012 and also unlock significant cash flow through the reduction of the pension deficit.”